Property Rights Design and Market Process: Implications for Market Theory, Marketing Theory, and S-D Logic

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1 Property Rights Design and Market Process: Implications for Market Theory, Marketing Theory, and S-D Logic Journal of Macromarketing 31(2) ª The Author(s) 2011 Reprints and permission: sagepub.com/journalspermissions.nav DOI: / Michaela Haase 1 and Michael Kleinaltenkamp 1 Abstract This article highlights the relevance of property rights theory for the development of market and marketing theory from the perspective of service-dominant (S-D) logic. The outcome that market actors promise to cocreate depends on the property rights arrangement characterizing a transaction. Within the institutional framework of an economy, and based on an analysis of contract types and transaction arrangements, the authors explain how property rights both enable and constrain the achievement of the actors objectives. In addition, the authors discuss the consequences of property rights designs for the domain of marketing theory and elucidate the implications for S-D logic that can be derived from a property rights perspective. Keywords property rights, ownership of resources, ownership of rights, resource integration, economic organization, contractual regimes, uncertainty, institutional change From the perspective of service-dominant (S-D) logic, services are exchanged for services, and all organizations, households, and individuals can be viewed as resource integrators that cocreate value with other entities (Vargo and Lusch 2008). This perspective leads to the following questions: (1) How do such exchanges and processes of resource integration take place in a market economy? (2) How does each actor participating in such an exchange get access to the other parties resources and service? (3) How can the parties be assured that the exchange of service and the integration of resources will actually take place? and (4) What are the rules of the game that lead to functioning and ongoing exchanges of service for service observed in the daily reality of markets? This article highlights the relevance of property rights theory for the exchange and provision of service. Because both S-D logic and property rights theory view exchange as central, property rights theory offers a suitable theoretical basis for covering the issues mentioned and bringing them to an economic analysis. Therefore, the main purpose of this article is to show the contribution of property rights theory to S-D logic. The authors argue that property rights theory offers a logic of economic thinking that is compatible with that of S-D logic and that no service for service can be exchanged without also exchanging property rights to both operand and operant resources. By bringing together the perspectives of S-D logic and property rights theory, the authors provide a basis for the development of a market-oriented marketing theory. So far, marketing theory has developed more or less without a clear understanding of markets, though marketing deals with individuals and organizations acting in markets. Furthermore, an important motivation for the authors undertaking is that both S-D logic and property rights theory were developed from a critique of neoclassical economics as a basic theory of markets. In this respect, S-D logic focuses especially on the economic foundation of marketing theory and developments based on it have contributed to what S-D logic designates as goods-dominant (G-D) logic. In contrast, property rights theory has been developed mainly as a stream within the new institutional economics in an attempt to overcome the unworldly assumptions about individual behavior formulated in neoclassical theory. Through the treatment of economic organization, the authors connect both approaches. This indicates that all activities in markets and organizations (e.g., firms and households) call for transaction arrangements, which enable an exchange of service for service. The authors distinguish between ownership of resources and ownership of rights and reveal the common base of S-D logic and property rights theory in social theory. In addition, they acknowledge the impact of society on marketing (Layton and 1 Marketing Department, School of Business & Economics, Freie Universität Berlin, Berlin, Germany Corresponding Author: Michael Kleinaltenkamp, Marketing Department, Freie Universität Berlin, Otto-von-Simson-Str. 19 D Berlin, Germany michael.kleinaltenkamp@fu-berlin.de

2 Haase and Kleinaltenkamp 149 Grossbart 2006) and exemplify property rights arrangements as boundaries between marketing and social institutions. With reference to the works of the old institutionalist John R. Commons on transaction arrangements and property rights, the authors highlight the relevance of economic organization for the development of market and marketing theory. In the process, they examine the connecting lines between (new) institutional economics and economic sociology that become apparent (Layton and Grossbart 2006). After that, the authors show that the type of transaction determines the outcome and not vice versa. Contracts based on property rights arrangements specify transaction objects that, in everyday language, are designated as goods or services. From these different compositions of property rights bundles, the authors present a two-dimensional typology of contracts. These different types of transactions redefine the domain of marketing theory in a way consistent with S-D logic. The transactional design is driven by the actors attempts to identify, negotiate for, and realize their options for action. They discuss how property rights influence the design of economic activities, particularly transactions or relationships. It is the actors task to prepare the adequate transactions designs and put them into practice. Finally, the authors identify the synergies between the theoretical perspectives of S-D logic and property rights theory. Property rights theory can gain from a reflection on the meaning of the concept of service with respect to the understanding of economic activities. The authors argue for the framing of S-D logic as a market theory based on property rights theory. From a micro-marketing perspective, the knowledge about the pertinent property rights bundles required for the achievements of the actors ends is among the most important operant resources. From a macro-marketing perspective, property rights are part of the institutional framework of society and thus shape the range of action for actors. Market Theory from the Perspective of Property Rights Theory This part of the article provides a short introduction to the main concepts of property rights theory. The authors show that, according to property rights theory, the economic outcome is a social entity a consequence of social relationships. Ownership of Resources and Ownership of Rights to Resources According to property rights theory, neither a resource nor its attributes are of importance; rather, it is how an actor makes use of the resource or how the attributes serve him or her that is important. Whether a resource or its attributes are of use to an actor depends on the property rights to the resource: The property rights theory distinguishes four types of property rights to a resource (Demsetz 1998; Eggertsson 1990; Furubotn and Pejovich 1972): (1) the right to use it (jus usus in Latin); (2) the right to appropriate the returns arising from exploiting it (jus usus fructus); (3) the right to change the form, substance, and place of it (jus abusus); and (4) the right to transfer all or some of the aforementioned rights to that commodity to others (jus successionis). Within the framework of market transactions, the exchange of property rights is characterized by the allocation of property rights to a certain resource and a certain economic actor. In property rights theory, resources are not homogeneous entities but rather bundles of features with many but partly unknown areas of use (Barzel 1997; Haase 2000). The respective property rights can be concentrated or attenuated to various degrees. A full concentration of property rights means that one economic actor holds all property rights to a resource. In contrast, attenuation means that various actors hold the property rights to certain features and thus can realize the resulting options. In the simplest case of a market transaction, the seller gives away the property right to ownership of a product in exchange for the property right to the monetary equivalent of the product. In many cases, especially in what is referred to as services business, it is not the ownership of resources but rather the ownership of other property rights that is of interest to the customer and therefore is transferred (for a discussion of nonownership transactions within services marketing, see Lovelock and Gummesson 2004 and Lovelock and Wirtz 2007). Regardless, an exchange will only take place if both the buyer and the seller of the offering agree that the property rights bundle they receive are of higher value than the one they give away. In this sense we restrict our discussion to private property. There is also property in the public domain, which relates to defined property rights (rights to use public highways, rights to pollute, and fishing rights), or common pool resources, which relate to the tragedy of the commons (Hardin 1968; Ostrom 2005). Despite the widespread use of the concept of property or ownership in economics, no unified definition exists. According to property rights theory, ownership of a resource can be identified as a state in which an actor holds all four types of property rights described previously (Haase, Chatrath, and Saab 2008; Haase 2008). Ownership in this sense does not mean that all four forms of property rights must be made available to other actors: Without giving up ownership of a resource, the owner can transfer jus usus, jus abusus, and jus usus fructus to other actors if this transaction is considered economically reasonable. In this case, the property rights to a resource are attenuated that is, the ownership of property rights, not of the resource, is divided. As the authors discuss below, divided ownership of property rights is an important presupposition, condition, and consequence of economic action, as well as a source of transaction costs. The Social Theoretical Dimensions of the Exchange of Property Rights As part of an economy s institutional structure, property rights are action-enabling rights that emerge within a social context. Property rights are classified into two groups: economic and

3 150 Journal of Macromarketing 31(2) legal property rights. Economic property rights are individuals presuppositions and capabilities to make use of resources; legal property rights pertain to the granting and enforcement of economic property rights by the state (Barzel 1997, 90). Economic property rights are delineated within a given but changeable social and legal order. So, the concept of property rights does not cover illegal or socially unaccepted uses of resources. With regard to what is acceptable or even legal, however, a range of interpretations exist because of different cultures, norms, and routines (Levine 2005). Even within one society, the range ofallowedusesofresources may differ. 1 As Schmid (2004, 7) notes, A property right is not something a person has independent of the relationship that person has to others (see also Furubotn and Pejovich 1972). The transaction object itself and its subjectively estimated value, respectively, depend on that person s relationship with other people and to society in general (Freyfogle 2007) and on the structure of legal property rights and the way the person can influence that structure (see Levine 2005, 63 for the sharp distinction between civil law and common law countries in this regard). In property rights theory, the analysis of small-scale interpersonal relations and culture can be relevant. Zelizer s (2011, 11) conclusion applies to property rights theory: Institutional economists have plenty in common with institutional and economic sociologists: awareness of organizational processes, concerns about contract enforcement, openness to culture, and more. For economic activities such as value cocreation and relationships building, S-D logic refers to reciprocity (Vargo and Lusch 2008; Vargo 2009), which is a fundamental principle of social theory reflecting a social norm that yields social stability (Gouldner 1960). Reciprocity is a basic informal institution that can reduce the uncertainty of actors. As Gouldner (1960) argues with respect to one party in a social or economic exchange, the norm of reciprocity imposes obligations on the other party but only when the individual is able to reciprocate (p. 177). There is no guarantee that the other party will accept the obligation; in this case, the other party can face sanctions related to the violation of the norm (see Bowles 2004). S-D logic s reference to social theory is shared with a comparative stance in property rights theory. New institutional economics, of which property rights theory is a part, has questioned the restriction of the older strands of neoclassical theory to person good relationships. In its place, it has brought person person relationships into focus. This focus becomes apparent in what Commons (1931) calls a bargaining transaction. Market exchange is a process of cooperative value creation, which depends on the joint efforts of both parties (Barzel 1985; Haase 2000). The consequences of such a transaction, the offerings related to it, and the distribution of the benefits accruing from it are sensitive to the efforts the actorsmakeandthewaytheynegotiate for and then enforce their interests. In institutional economics, the recognition of person person relationships has thus led to a shift in understanding of the economic problem, leading away from optimization toward interaction and cooperation. In property rights theory, this is expressed through the characterization of the offering as a relational entity. A relational entity is something that is configured, negotiated for, and realized in the course of the interactions taking place throughout a market transaction and are constrained and enabled by the legal framework. 2 In their value propositions, buyers and sellers make promises regarding their service or their contribution to the other party s goals. What each party to a transaction gets depends more or less on the cooperation of the other party (at this point, the authors restrict the analysis to a dyadic perspective). From this derives a change of view on the subject of exchange, the transaction object. A transaction object is a resource for the value creation process or the resourceintegrating activities of the actors. Transaction objects can be conceived as comprising outlined activities or combinations of such activities with operant and operand resources, both tangible and intangible (e.g., goods, skills, and knowledge). As Barzel (1997, 64) emphasizes, resources are many-attribute assets. Which attributes are searched for, identified, and valued depends on their contribution to the actors ends. Thus, the effective economic good is the expected contribution of the transaction object to the achievement of the actors ends. From the customers point of view, the transaction objects are exchanged for monetary equivalents because they are considered contributions to problem solving. These contributions (their direct or indirect service) are derived from the exercise of the property rights assigned to the outcome, transaction object, or offering. 3 From this perspective, the utility or benefit derived from any kind of offering depends on the options for action for which the offering is an immediate or mediate means. Both the contribution to and the achievement of ends are determined by the attributes of the operant and operand resources involved in this process (see Madhavaram and Hunt 2008 for a discussion of resource categories and a hierarchy of resources), the property rights bundles related to them, and the joint value creation process undertaken by the supplier and customer of the transaction object. According to Commons (1931), but contrary to the understanding of the term transaction elsewhere in services marketing (for discussions of the transactional vs. relationship orientation in services or relationship marketing, see Grönroos 2000; Sheth and Parvatiyar 2000), transactions are really trans-actions instead of either individual behavior or the exchange of commodities. The actors involved in transactions interact with each other to accomplish their ends. Although markets can be conceived of as exchange mechanisms, exchange presupposes or entails collaborative activity at many levels of business (Ballantyne and Varey 2008, 13). These interactions are executed by individuals who act according to their interests, which are not totally harmonious with each other and which are directed at the configuration and accomplishment of action opportunities. Conflicts emerge throughout the course of a transaction and are regulated or solved by the transaction parties joint efforts. Commons characterizes the transaction using the terms conflict, order, and mutuality.

4 Haase and Kleinaltenkamp 151 Managerial and Bargaining Transactions Exchange is a central term in market theory and economics. However, depending on extensions of the meaning of this term (Bagozzi 1975), it can provide only a limited characterization of what the subject and objective of a transaction are. According to economic theories developed as market theories, exchange is still the main form of economic activity. From a discussion of transactions and made orders, the authors put emphasis on economic organization. The concept of exchange is deeply rooted in early stages of economic theory development, which barely addressed phenomena of economic organization or the design of transaction regimes, let alone organizations. Therefore, with regard to economic organization, Oliver Williamson, one of the first organization theorists in the new institutional economics, referred to the transaction as the basic unit of analysis (Williamson 1985, 18). This implies that there are other units of analysis such as, for example, organizations and networks. S-D logic, which originated in both market and organization theory (Hunt and Madhavaram 2006; Madhavaram and Hunt 2008; Vargo, Lusch, and Morgan 2006), deals with all units of analysis (i.e., dyadic relationships, organizations, and networks). In new institutional economics, as Furubotn and Richter (2008, 16) emphasize, institutional order or the institutional framework of an economy became the object of research, and attention was devoted to considering the implications of given institutional arrangements for economic behaviour. In this respect, the focus was on made orders (or designed organization) instead of spontaneous orders (or spontaneous social organization 4 ). The transaction is an example of a made order. Commons (1959) provided substantial contributions to the understanding of the transaction as the unit of economic analysis: He considered the transaction the ultimate unit of economic investigation, [or] a unit of transfer of legal control. This unit enabled me to classify all economic decisions of the courts and arbitration tribunals under the variable economic factors involved in transactions as they actually are made (Commons 1959, 4). In addition, Commons conviction that transactions are characterized by a transfer of legal control has found its way in both economics and business economic analyses (Williamson 1985 refers explicitly to Commons 1931 work; cp. Coase 1984 for a negative reaction). The transaction is the unit of analysis in which advisements about the ends and means of activities, the interests of the involved parties, the condition and composition of the involved resources, the property rights assigned to them, the legal order of the economy, ethical considerations, and so forth, are all brought together. Thus, all resource-related decisions ultimately appear in changes of the property rights structure of offerings. As a unit of analysis, a transaction is characterized by institutional arrangements, organizational and technical arrangements related to factor combinations, and the communication between the economic actors involved in the procedure. Market transactions (or in Commons terms bargaining transactions ) are characterized by the agreement of legal peers on the transfer of property rights to resources, both physical items and access to other people s service (Commons 1931; Schneider 1995). They are palpably reflected in contracts of purchase, employment, work and labor, service, and other areas (Plinke 2000; Schneider 1995). Market transactions should not be confused with managerial transactions through which hierarchical relationships are organized (Schneider 1995). Market transactions are accomplished if the obligations of the exchanging parties, expressed through their value proposals, are fulfilled. Both types of transactions require some degree of organization and can be conceived of as governance structures (made orders) for exchange and coproduction. Bargaining transactions change property rights structures, whereas managerial transactions result from these changed structures. Managerial transactions always take place within a framework set by the available legal system as well as the relevant market transactions. The example of a dependent employment relationship illustrates this well. Through the work contract, such as a bargaining transaction in the labor market, a company or a superior receives, within the framework of the applicable labor legislation, the right to issue directives to another employee to conduct certain actions. In an enterprise, these actions (as managerial transactions) serve to create the offerings the enterprise is bound by contract to deliver to its market partners. Resource integration is the economic counterpart to the division of labor and as such it is also the basic connection point between S-D logic and property rights theory. If all actors are resource integrators, they need to understand how to access each other s resources. Property rights theory clarifies what forms of access to operant and operand resources exist (note that not all resources property rights are assigned to) and what economic problems are related to them. In this article s next part, the authors present different types of contractual regimes, or institutional orders, that result from different types of economic activities in which economic actors engage. Market Transactions as Transfer of Property Rights Property rights theory neither starts nor ends with a goods services dichotomy. Property rights theory undermines the goods services distinction, even though it pays no attention to services. From a different starting point in economic market theory or generalized microeconomics (Eggertsson 1990), property rights theory has reset the concept of good in its conceptual framework, and the concept of services has no special place in it. In particular, from the property rights theory perspective, the dichotomy between goods and services, or the characterization of services according to the IHIP (intangibility, heterogeneity, inseparability, and perishability) paradigm (Fisk, Brown, and Bitner 1993; Lovelock and Gummesson 2004; Zeithaml, Parasuraman, and Berry 1985), was never important. Whereas services marketing came to the fore because of the need to deal with the output category the IHIP list describes, property rights theory gives rise to the distinction between different types

5 152 Journal of Macromarketing 31(2) Table 1. Resources and Action Options (Translation of Ullrich 2004, 173) Actors conduct activities on their own (residual rights of control, successionis and abusus, usus, usus fructus) Actors let activities be done by others (abusus, usus, usus fructus) Actors are Owners and Users of Resources (Residual Rights of Control and Successionis) Case 1 buy and make Case 2 buy and let make Actors are not Owners but Users of Resources (usus, fructus) Case 3 rent and make Case 4 rent and let make of transactions (based on different property rights arrangements) that enable different ways to provide service. As the authors discuss, according to property rights theory, the type of transaction characterizes the offering and not vice versa. Basically, there are two types of transactions: transactions that transfer ownership of resources and rights (exchange type I) and transactions that lead only to the transfer of ownership of rights but not to resources (exchange type II). Although in exchange type II resources are transferred, no ownership of the resource is transferred. Everyday language, and consequently economics, refers to offerings related to the exchange type II as services. Note that the distinction between exchange types I and II does not replicate the goods services distinction from a different perspective. Ontologically speaking, there are no services in property rights theory. Nevertheless, commensurability exists between phenomena singled out and addressed by services marketing approaches and property rights theory. Related to exchange type II are particular economic processes that include particular needs for cooperation between provider and customer, which are not adequately reflectedintheg-dlogicandthemarketingapproachesbuilt on it. The subsequently evolving IHIP approach also reflects these inadequacies but is also somewhat mired in G-D thinking to be able to fully grasp the fresh perspectives (Lovelock and Gummesson 2004). In contrast, Lovelock and Gummesson (2004) distinguish between ownership and nonownership transactions. Although this distinction is valuable, it does not refer to property rights theory and therefore does not address ownership of rights and resources. Property Rights Structures and Action Options The property rights structure of a certain resource at a certain point in time is the result of (1) a property rights structure assigned by the legal system and (2) all further market transactions that have been conducted up to that point for these property rights. This structure appears through a more or less strong concentration or attenuation of the property rights to the resource, that is, their assignment to one or more actors (see Barzel 1997 for the reasons leading to these decisions; see also Foss and Foss 2000; Ullrich 2004). Which property rights are transferred in a market transaction and in which particular form are the result of the actors decisions about the action options they desire. Two options have been subsumed under the heading make-or-buy decision (Ullrich 2004): First, economic actors can acquire ownership of the resources they want to use or they can leave the ownership to another actor. Second, they can perform all activities associated with the use of the resource themselves or let others perform them. The combination of these options results in four cases, which is shown in Table 1. The buy option is strongly related to operand resources because it is impossible to become the owner of individuals mental or nonmental activities. An individual can become the owner of a right that brings these resources into action for his or her own benefit or that of another party. These rights, mainly jus usus, are strongly related to the two let-make options (cases 2 and 4). Case 1 ( buy and make ): The actors (want to) perform the desired activities by themselves and with their own resources. To do this, they must possess ownership of the respective resources or acquire it. Case 2 ( buy and let make ): The actors want certain activities to be performed with their own resources not by themselves but by others. For this, as in case 1, not only is the possession or acquisition of ownership required but the power of disposal over those human resources that are to perform the activities is also required. There is no ownership of operant resources or activities but only of the right to applications of skills, execution of performances, and so forth. Case 3 ( rent and make ): As in case 1, the economic actor performs or wants to perform the activities by himself or herself. In contrast with case 1, he or she is only interested in jus usus or jus usus fructus but not in being or becoming the owner of the resource. This is why the actor does not need to own or acquire it. Case 4 ( rent and let make ): Activities are performed by others with external resources that are yielded for use. The actor deciding this option must have both the legal disposal of the rights to use from all other resource owners and the property rights to the human capital of the persons acting on his or her behalf. As Table 1 shows, because of the different action options made available by certain property rights structures, an actor needs to hold a different set of property rights with regard to the operand and operant resources he or she wants to use or to bring into action. If the actor does not dispose of these options at a certain

6 Haase and Kleinaltenkamp 153 Table 2. Exchange and Types of Contracts in Relation to Buy, Make, Rent, and Let Make (Translation of Ullrich 2004, 175) Subject of the contract Contractual Form Contract of Purchase Hiring Contract, Leasing Contract Resources Property rights to be transferred in a transaction Supplier receives: successionis on money (purchase price) Customer receives: unlimited in time successionis on resources Supplier receives: successionis on money (leasing, hiring fee) Customer receives: limited in time usus, fructus, abusus on resources during process Non-human assets (physical and non-physical capital) Buy Rent Processes Human assets (human capital) Make Let make Property rights to be transferred in a transaction Supplier receives: successionis on money (wage, salary) and abusus on resources during process Customer receives: unlimited in time usus on human capital during process Supplier receives: successionis on money (charge, fee) and abusus on resources during process Customer receives: limited in time usus on human capital during process Contractual form Contract of employment Contract for work and labor, contract of service point in time for whatever reason he or she needs to conduct market transactions with other actors to acquire the missing property rights. This is possible because at every point in time, there might be other owners of property rights, who assess their resources differently (Foss and Foss 2000). Therefore, they can assign resources for a limited or unlimited time to those who want to acquire them, typically in exchange for property rights to other resources. Thus, property rights theory also enables an economic understanding of the modern ways of division of labor that have taken place and are still taking place mainly in the business-to-business sector. It highlights the relevance of nonownership access to resources (i.e., the ownership of rights to resources) as many of the restructuring processes appear in sometimes complex property rights structures that have one thing in common namely, that the user of a resource is not its owner and that ownership of rights to the performances of resources dominates economic performance. all other property rights to the resource, while the seller receives the jus successionis to the payment. Rental, leasing, and hiring contracts translate into the rent case. The customer acquires the limited jus usus to the particular resources, while the provider receives the jus successionis to the revenue (i.e., rent, lease, and the like). Contracts of employment put the make option into operation. The provider receives an jus successionis to the remuneration (wage/salary) entitled to him or her for the work. To perform the job, he or she also receives the jus abusus to the necessary resources of the customer (i.e., the employer). In return, the employer receives jus usus to the human resources of the employee. Finally, the let-make case is realized through what is called contracts of service or contracts of work and labor. The provider receives the jus successionis to his or her remuneration. In return, the customer concedes the jus usus to operant resources and their mental and nonmental activities or performances. Types of Options for the Design of Contractual Regimes Depending on the kind and number of property rights to be transferred, designs of exchange must be chosen or shaped. We distinguish four basic ways to achieve the aspired exchange of property rights (see Table 2): The contract of purchase expresses the institutional dimension of the transaction for realizing the buy option of resources, that is, the purchase of nonhuman, tangible and intangible goods; capital goods; or financial assets. As a result, the buyer receives the unattenuated jus successionis (other property rights can also be attenuated as in the case of the purchase of a rented apartment or machinery) and Table 2 shows that the choice or the development of a certain form of contract is the result of considerations of the optimal ownership of resources or rights (Ullrich 2004) with regard to the action opportunities an actor desires. The optimal owner of certain property rights may change depending on the progress of market processes leading to new transactions and property rights combinations (Ullrich 2004). In the case of a contract of purchase, all property rights to a resource are transferred, at which point the jus successionis is of decisive relevance. Ownership of a resource means the legally guaranteed right to the transfer of the whole bundle of property rights related to it. Many forms of contracts exist in which certain property rights to the relevant resources remain with the provider. Thus, on conclusion of employment or a work and labor contract, the

7 154 Journal of Macromarketing 31(2) Table 3. Two Types of Transaction Exchange type I Exchange type II Action opportunities Buy and make; buy and let make Rent and make; rent and let make Ownership Ownership of resources ownership of the full property rights bundle to a resource Ownership of rights to resources Non-ownership of the full property rights bundle to a resource Resource type Operand resources Operand and operant resources Contract type Contracts of purchase Rental, leasing, hiring contracts Contracts of employment; contracts for work and labor; contracts for service Note: The realization of the let make option requires a subsequent transaction. lessor still remains the owner of the rental objects, and the lessee (employee) keeps his or her human and civil rights. Note that one cannot become the owner of mental or non-mental activities. Jus usus with respect to the operant resources of an employee or freelancer is the right to realize the promise of the other party expressed in his or her value proposal. This right can be transferred, not the person who made the promise (since the abolition of slave work, the jus successionis right to human beings no longer exists). Table 3 presents an overview of the characteristics of exchange types I and II. From the provider s point of view, property rights to the relevant operant and operand resources are attenuated within the framework of a transaction. The owner transfers at least the jus usus of the rental object to the tenant, and employees or contractors concede to their employers or clients rights of access or scheduling with regard to their working hours. 5 With regard to such an attenuation of property rights to a resource, its aspired use cannot be realized without the mandatory contribution of the customer. In such cases, which we refer to as collaborative market transactions, the customer must allot his or her part of the property rights and the provider the remaining part of the same. Collaborative Market Transactions and Bilaterally Attenuated Property Rights As an initial provisional result, collaborative market transactions opening up the action opportunities rent, make, and let make always involve an attenuation of property rights to a resource the provider brings to the transaction. Thus, in these types of transactions, a joint planning addressing the resource integration process and its constituents (i.e., the relevant resources to be supplied by the provider and customer) is always necessary. During the course of the transaction, specified property rights (jus usus, jus usus fructus, and jius abusus) are temporarily transferred from provider to customer, while the right of ownership (jus successionis) remains with the original owner (i.e., the provider; Ullrich 2004). From a property rights perspective, this characterization specifies the types of resource and rights utilization and paves the way to an analysis of the processes through which both the provider and the customer bring resources to a transaction. Though not the focus of this article, the customer must also insert resources into the transaction to realize the value of the temporarily attenuated ownership of property rights the provider transfers. To integrate the customer s resources into the operational processes of the joint value creation process, an additional temporary transfer of property rights from the customer to the provider is necessary. For example, an object such as a car, a bicycle, or a computer can only be repaired by a provider of repair capacities if jus usus and jus abusus are temporarily granted by the customer. An external training measure can only succeed if the participants surrender their right to organize their own time management to the provider of the measure. Thus, from a property rights perspective, collaborative market transactions are characterized by both the temporary attenuation of property rights to the resources the provider brings to the transaction and the temporary attenuation of property rights to the resources the customer integrates into the cocreation process (Fließ 2001; Kleinaltenkamp 1997a; Kleinaltenkamp and Haase 1999). This means that the related property rights to the resources from both transaction partners are always attenuated bilaterally. Through this bilateral attenuation evolves an often complicated net of activities of alienation, retrocession, and safeguarding of property rights with partly far-reaching consequences for the initiation, enactment, and control of transactions as well as the accompanying production process in a narrower sense (for resulting consequences, see Fließ 2001). Transactions, Uncertainty, and Institutions The fundamental consequence of the understanding of a transaction as a transfer of property rights lies in both the uncertainty of the future value of the property rights and the question of how to safeguard them. As mentioned previously, property rights are transferred in a collaborative transaction and their prolongation into a managerial transaction in two ways: Temporarily transferred property rights: jus usus, jus abusus, and/orjus usus fructusto the provider s internal operant or operand resources that the customer uses during the transaction, and jus usus and/or jus abusus to the customer s external operant and operand resources that are integrated throughout the process of cocreation of value (during collaborative production). 6

8 Haase and Kleinaltenkamp 155 Figure 1. Functional model of institutions (translation from Jacob 2002, 60). Completely transferred property rights: jus successionis to the remuneration that the customer owes the provider and is usually paid at the end of the joint value creation process, and jus successionis to the provider s internal resources, which, after the end of the joint value creation process, are a part of the result of the creation process (in which the customer gains ownership) or are transformed into it. Not all property rights that are of relevance to the fulfillment of a particular contract are transferred to the other transaction partner. This pertains to the jus successionis to the customer s external operand resources as well as the jus successionis to the provider s internal operand resources that remain the property of the customer or provider, respectively, after the completion of the transaction. For example, a car repair shop might ensure that the car is owned by the customer but not stolen by him or her. Conversely, the owner of the car in need of repair is interested in the provider being the owner of the machinery or having the rights to use it. Both constellations might be important in the case of debt claims, but they do not necessarily affect the activities necessary to perform the repair. A large difference exists between simple, meaning noncollaborative, and complex, meaning collaborative, market transactions: In a simple transaction, the property rights to a standardized good are exchanged with the property rights to a respective remuneration. In contrast, a collaborative transaction is, or must be, shaped by a mostly intricate net of intertwined exchange processes of property rights. In the sense of the principal agent theory, each transaction partner assumes the role of a principal and the role of an agent with regard to the rights to be transferred (Kaas 1991; Kleinaltenkamp 1992). The particular role allocation depends on the cocreation process itself or its results. According to the typical principal agent constellation, the provider acts as agent and the customer as principal depending on the results of the cocreation process. If, for the generation of a certain offering, the integration of external resources is necessary, the provider becomes the principal and the customer the agent, who influences the provider s scope of activities through external resources (Kleinaltenkamp 1997a). Ownership and nonownership also influence actors behavior. It makes a great deal of difference whether the user of a resource is also its owner, which means whether or not the property rights are attenuated. Nonownership is based on an attenuation of property rights, leading to specific risks for the holders of property rights that need to be addressed. Nonownership forms of access to resources are in need of specific transactions designs. The finding and shaping of such transaction designs are important tasks for marketing theory and practice in addition to the creation of offerings. The more specific the agreements to meet a single case, the greater is the uncertainty perceived by the transaction partners and the transaction costs resulting from the desire to control or reduce this uncertainty (for details and a comprehensive view, see Fließ 2001). In either case, institutional regulations for the execution and settlement of transactions must be found. Such institutions are characterized by their capacity to influence or steer the behavior of the transaction partners involved and, therefore, their capacity to reduce a transaction partner s uncertainty 7 with regard to the behavior of the other transaction partner (Jacob 2002, 51; see Figure 1).

9 156 Journal of Macromarketing 31(2) Institutions unfolding this effect typically comprise three elements (Jacob 2002, 58; see Figure 1): A rule or rules stating the consequences of a certain behavior, A sanction or several sanctions describing consequences of behavior not abiding by the rules, and A guarantee or guarantees securing the enforcement of a penalty. From this institutional theoretical point of view, the task of marketing is to shape an offering or a resources rights bundle as the object of agreement offered to a customer. Another, and sometimes even more important and challenging, task of marketingistofindorshapetherighttransactiondesignasan institutional setting to facilitate the exchange of property rights and thus make an exchange of service for service possible. S-D Logic and Property Rights Theory: New Perspectives for Market and Marketing Theory Resource integration, the counterpart to division of labor, is a precondition for value creation. It also plays a fundamental role in S-D logic because service is provided by means of resource integration (Lusch and Vargo 2006, 284). All economic actors (e.g., firms and households) integrate resources and cocreate value on this basis. If, for example, the customer does not combine his or her operant and operand resources with those of the provider, no cocreation of value can take place. S-D logic states that the customer is always a cocreator of value. Property rights theory links the concept of value cocreation with the concept of transaction or, more generally, with economic organization. On this basis, it can make specific claims about the degree of cocreation and how it affects the governance of the cooperative activities. The degree of cocreation required during a bargaining transaction depends on the transaction object or offering. Property rights theory distinguishes between two forms of value cocreation: bargaining transactions and managerial transactions. A bargaining transaction is an (organizational) entity of the market through which the interactions of the actors involved are framed, while managerial transactions are organizational units that put the results of a concrete market (bargaining) transaction into practice. As our analysis shows, the alternatives are not buy or make but rather buy and make or buy and let make and rent and make or rent and let make. This occurs within the legal framework and organizational boundaries and with more or less cooperative efforts of those who act for or in favor of an organization, such as a firm, corporation, or household. In addition, property rights theory is both more informative and less general than S-D logic. Property rights theory is more informative because of the analytical framework it brings to the application of instances it shares with S-D logic. In the cases in which it makes sense to analyze the transactional design, such as the governance structure of a transaction with respect to property rights arrangements, it make sense to apply property rights theory. However, there are also exchanges beyond economic exchange that S-D logic can address but are not within property rights theory s range of application. S-D logic s first foundational premise states that service is the fundamental basis of exchange. According to property rights theory, property rights are also a fundamental basis of exchange. With this formulation, however, the authors do not suggest that there is, independent of the theoretical perspective, an ultimate reason for economic activity. As the discussion highlights, the neoclassical, the new institutional economic, and the S-D logic viewpoints on this issue are often quite different because of the divergence in the theoretical conceptions that lie behind these views. Regardless, property rights are not the final purpose of economic activities, and its perspective and that of S-D logic can be transferred to each other: Property rights are a means for achieving economic ends (but not all kinds of value creation are related to economic ends). Property rights are also an expression of the constitution of society, a presetting on the conduct in business and economic affairs. S-D logic s concept of service also refers to general presuppositions (interaction and relationship), means (resource integration, cocreation, and application of skills), and purposes of economic activities (benefit). S-D logic and property rights theory can inform each other with respect to the means and ends of economic activities. For the means, property rights theory points to the relevance of transaction arrangements and the institutional framework for any theory of markets and marketing. Only the disposal of property rights to resources makes them usable for economic actors; property rights open up the action opportunities, which is the main reason for the actors economic activities. Resources can only serve in the sense of S-D logic if actors have access to them. In a market economy, this is only possible through an exchange of property rights in whatever form. So, from a property rights perspective, the exchange and reallocation of property rights is a necessary prerequisite for the exchange of service in a way consistent with S-D logic. A value proposition must be specified by an idiosyncratic property rights arrangement. From this analysis, the authors propose that the ability to provide transaction designs suitable for the exchange of property rights should be recognized as operant resources to be executed. For the ends of economic activities, S-D logic highlights value creation or the benefits accruing from this. In contrast, property rights theory emphasizes action opportunities that can be translated into value creation or benefits. Note that both approaches stress activities (value creation is something that must be done; action opportunity is something that must be identified or negotiated for). Action opportunities are made available by the idiosyncratic bundle of rights to resources that an actor holds. Action opportunity has a much broader connotation than utility (note that utility does not necessarily need to arise from consumption or economic activities in general). This does not mean that actions are ultimately directed at

10 Haase and Kleinaltenkamp 157 Table 4. Connection Points Between Property Rights Theory and S-D logic Preconditions Means Ends Economic or marketing problem General story Property Rights Theory Formal and informal institutions (legal and economic property rights, contracts) Transaction arrangements (resource integration, cocreation) Resource-rights bundles (relational entities) Action opportunities (translatable into value creation and benefits) Design of transaction arrangements (focus on cooperation, dealing with uncertainty) How to deal with division of labor? Answer: property rights S-D Logic Informal institutions (reciprocity) Resource integration Application of skills Offerings (relational entities) Value creation, benefits Provision of service How to deal with division of labor? Answer: Resource integration the achievement of individual utility stemming from consumption or production, as assumed in neoclassical economics. The actors intent can also be directed at completely different ends than consumption and production (e.g., coping with uncertainty and creating value). Consider, for example, the G-D view of consumption. As Vargo (2009) points out, consumption does not destroy value. From a property rights theory perspective, consumption can be conceived of as a particular form of user process through which action opportunities are realized, and the realization of action opportunities can occur after the bargaining transaction is terminated; then, the customers must realize their action opportunities by themselves, or perhaps in interaction with others or within networks, but usually not with the cocreator of the respective resources rights bundle or offering. This field has not yet been explored by property rights theory, but there is no basic hindrance to extend its analyses to this field. Table 4 summarizes the discussion in this article. Conclusions In summary, according to property rights theory, resources and the rights assigned to them are important components for understanding economic activity. Division of labor and the subsequent division of resources, and the property rights they imply, are the reasons why resource integration is needed to create value for economic actors as well as societal prosperity. The actors themselves will determine how the transaction object, the resources rights bundle, and the particular transaction arrangement contribute to their achievement of goals. The actors reflection on the design of transaction arrangements, the learning processes with their source in experiences related to particular transaction arrangements, and subsequent processes of evaluation and redesign are important motors of institutional change. From the authors perspective, it is the visible hand expressed in economic organization that provides the toehold and edifice for the knowledge processes emphasized by the invisible-hand tradition in Austrian economics (Hayek 1973). The new institutional economics, in particular property rights theory, provides a capable conceptual framework for the analysis of service economies and, thus, a linkage between social theoretical issues, such as interaction and reciprocity, and economic issues, such as transactions, property rights, and the economic order they create. New institutional economics, and also marketing theory, argue for an analysis of economic organization and thus for a visible-hands view of service economies. Property rights theory provides a framework for a comprehensive analysis that relates micro-level ends of actors, meso-level interaction and cooperation, and macro-level institutional framing. In economics, property rights theory has already introduced a new logic. From a rhetorical point of view, it tells a story about the overcoming of neoclassical thinking, which is closely related to G-D logic. Although the story is told in its own theoretical language, the authors argue that this view is highly compatible with that of S-D logic, at least as they understand it. They have argued that S-D logic, as a theory of markets, needs to add a chapter about property rights and the consequences of property rights arrangements for marketing theory. Without property rights, no exchange of service is possible; without property rights-based analyses, every theory of markets and marketing is incomplete. S-D logic is now characterized by debates about fundamental issues. S-D logic is not a straight theory-development project on a predetermined course; at the given point in time, it is similar to an open source project, taking on more and more people who are attracted by the opportunity to discuss fundamental issues of theoretical and practical concern in their respective fields of study. The aim of this article was to compare S-D logic s discourse with thatbasedonpropertyrights theory and to emphasize how property rights theory-based problem identifications and solutions could inform and inspire S-D logic. Finally, the authors maintain that S-D logic s emergence in the field of marketing theory has proved a source of reflection and inspiration for other approaches, even in the field of economics. Acknowledgements We would like to thank Steve Vargo and our unknown reviewers for their valuable comments on this article. Declaration of Conflicting Interests The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.